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Birds of a Feather / Teens and Their Money


Subject:  MVL Price Date:  9/10/2009  5:05 PM
Author:  Jognils Number:  2637 of 2683

Hey guys,

I know the board has been extremely quiet lately, but if anyone still checks this regularly, I've got a discussion starter. I've been closely following the news of Disney's buyout of Marvel Entertainment, and one thing that has confused me is MVL's price since the announcement. Perhaps someone (Aaron?) can enlighten me. Here's my reasoning: the deal is that MVL shareholders will receive $30/shr. in cash and 0.745 shares of DIS stock per share of MVL stock.

If the market is at least somewhat efficient, then MVL's price movements leading up to the exchange should almost exactly track those of Disney to prevent instant profits from arbitraging (simultaneously buying and selling a stock) when the trade takes place.

In my thinking, MVL's shares should be trading at or very close to $30+(.745)(DIS Price), which is what MVL shareholders will receive at the completion of the buyout. At today's DIS price of $28.36, that should put Marvel's share price at about $51.13. Marvel closed today at $49.85.

So my question is, why aren't investors bidding up Marvel's price to take advantage of a potential $1.28/shr. instant profit? What am I not considering that other investors clearly are?

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